Interactive Investor

Insider: two buying opportunities after shares sell-off

24th January 2022 09:10

Graeme Evans from interactive investor

The past week has wiped billions off the UK stock market, but these directors reckon their stock is going cheap. 

The top two executives at Cazoo investor Molten Ventures (LSE:GROW) have topped up their stakes after seeing tech sector turbulence drag the FTSE 250 stock 18% lower in 2022.

The purchases worth a combined £60,000 were made by chief executive Martin Davis and chief financial officer Ben Wilkinson at prices between 840p and 873p, compared with the venture capital firm's net asset value of 887p at the end of November.

Shares were as high as 1,190p in the autumn as the company formerly known as Draper Esprit reaped the benefit of online tailwinds created by the pandemic and the success of investments including payment processing platform Form3 and the banking app Revolut.

In November, analysts at Berenberg backed shares to reach 1,300p after Davis guided the market to fair value growth of 35% for the year to March, up from 27% at the half-year stage.

Davis also told investors that Molten was sufficiently diversified to counter any future volatility, given that its investments ranged from climate tech to health tech and fintech.

He said: “I am confident in venture capital as an asset class and in our strategy, enhanced investment platform, and diversified, resilient portfolio.”

However, Molten has not been immune to the market fears over rising interest rates, with two of its recently-listed investments, Trustpilot and Cazoo, at the forefront of selling pressure.

The consumer reviews platform joined the London market in March at 265p but is now 214.8p, while the New York-traded online car retailer that Molten backed with a £10 million investment has lost a third of its value so far in 2022.

Molten is a shareholder in 70 companies, with 17 within its core portfolio accounting for 68% of holdings. The vast majority are privately owned and offer investors the chance to back some of Europe's strongest entrepreneurs and tech innovators.

Other companies in its portfolio include the Bristol-based semiconductor firm Graphcore and robotic process automation software venture UiPath.

Molten boosted its firepower in June when it generated £111.2 million in a fundraising at a placing price of 800p a share. The move, which was backed by retail investors as well as Davis and Wilkinson, reflected the need for a stronger balance sheet as European technology companies increasingly mirror US investment trends through larger funding rounds.

More recent investments include Satellite Vu, a British start-up that uses satellite technology to determine insights into economic activity, energy efficiency and carbon footprint.

And earlier this month, Molten led a $25 million (£18.4 million) funding round for Mostly AI, a synthetic data platform whose technology can help companies to comply with privacy protection regulations such as GDPR.

As Draper Esprit, the company joined AIM in 2016 with a valuation of £120 million and is now worth £1.3 billion as a member of the FTSE 250 index.

In early November, Numis backed the shares to reach 1,130p and said that a premium rating was justified based on a strong track record of returns.

The broker said the company offered a “highly attractive, diversified way of gaining exposure to some of the fastest growing private technology companies in Europe”.

Betting that Card Factory delivers recovery

Card Factory (LSE:CARD) chairman Paul Moody has spent £112,000 on shares in the wake of the retailer's recent stock market hammering.

The purchase by the former Britvic (LSE:BVIC) boss was made at price of just over 56p, which compares with 63.5p seen prior to a poorly received Christmas trading update.

The stock slumped as much as 16% after the greetings card specialist warned it may not be able to fully offset higher freight, staff and energy costs in next year's results.

The headwinds overshadowed much better-than-expected December trading, which together with online sales growth of 23.3% on a two-year basis should mean profits for the year just ending will be £7 million-£10 million, compared with the £4.1 million consensus.

Liberum called the City's reaction “harsh” and said Card Factory should be trading at 110p.

The broker added: “Over the medium to long-term we see material upside, as the balance sheet improves further and profit recovers, driven by improvements to the store offer, online growth and more capital-light retail partnerships.”

However, Peel Hunt described management’s medium-term targets as highly optimistic.

The broker said: “In volume terms, the greetings card industry has been in decline for a long time, and we do not see that changing much.

“Yes, there is potential both online for cards and for gift attachments, but Card Factory is not the first retailer to spot that, and the marketing budget at the likes of Moonpig suggests that revving up online sales will not be easy from here.”

Former Britvic boss Moody became Card Factory chairman in October 2018 and ran the business on an interim basis between July 2020 and March last year.

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